DSM increases shareholding in Andre Pectin from 29 to 75 percent

05 Feb 2019 --- Royal DSM (DSM) is to increase its shareholding in Yantai Andre Pectin Co. Ltd. (Andre Pectin), a leading specialty food ingredient producer, to 75 percent. The transaction is expected to close in the first half of 2019.

Andre Pectin is located in Yantai, Shandong Province in China. The company is Asia’s largest producer of apple and citrus pectin, hydrocolloids providing texture solutions for food, beverages and personal care, with premier access to the world’s fastest-growing specialty food ingredients market.

DSM acquired a 29 percent stake in Andre Pectin in 2013. After settling a shareholders dispute, DSM has now agreed to purchase an additional 46 percent stake in Andre Pectin for a consideration of about €150 million (US$171.3 million), which will increase DSM’s total shareholding in the company to 75 percent. 

The total purchase price for this 75 percent holding represents an EV/EBITDA multiple of about 13 times based on the 2019 expected EBITDA of the company, excluding synergies. The company sales are about €65 million (US$74.2 million) with an EBITDA margin above 25 percent, reports DSM.

The remaining 25 percent of shares in Andre Pectin continues to be held by the Shandong Andre Group Co., Ltd, that supplies raw materials and utilities. DSM reports it will work closely with the Andre Group to improve the operational performance, ensuring reliable supply through its global sales network of high-quality (natural) pectin, while ensuring compliance with DSM’s safety, health and sustainability standards in the company’s operations.

In light of the transaction, DSM will consolidate the activities of Andre Pectin in its group results, according to a company announcement.

Andre Pectin employs around 410 employees. According to DSM, Andre Pectin has a strong organic sales and profit growth track record, generates attractive margins and is a highly innovative company with a strong sustainability profile.

Together with DSM’s majority stakes in DSM Zhongken Biotechnology Co., Ltd. and DSM Rainbow (Inner Mongolia) Biotechnology Co. Ltd., DSM has a strong hydrocolloid product portfolio with gellum gum, xanthan gum, wellan gum and pectin-based solutions, which DSM offers to the food, beverage and personal care markets.

Hydrocolloids provide a broad range of essential functionalities and physical attributes including gelling, texture, mouthfeel, viscosity and suspension. Three underlying consumer trends drive demand for hydrocolloids; the quest for convenient foods and beverages, consumers’ increasing demand for dairy and plant-based protein drinks and the trend towards clean labeling, says DSM.